A San Dimas tax preparer was sentenced Thursday to three and a half years in federal prison for running a scheme to defraud the Internal Revenue Service of millions of dollars through the submission of bogus returns.

Ismael Michael Padilla, 41, who operated under the name RMD Financial Services, was also ordered to pay $4.3 million in restitution to the Internal Revenue Service and serve a year under supervised release following his prison term. U.S. District Judge John A. Kronstadt ordered him to self-surrender to begin his sentence on July 27.

“I know I caused huge harm to the government,” an emotional Padilla told the court. “I brought it upon myself.”

From January 2008 through at least April 2016, Padilla submitted more than 1,100 false federal income tax returns to the IRS, each claiming tax refunds based on fabricated itemized deductions. He subsequently admitted filing the false returns in the names of his clients, but said he did so without their knowledge or consent.

In total, Padilla received about $5.2 million in false federal income tax refunds from the IRS by filing bogus returns, according to the IRS.

The false refunds claimed on the returns were never received by Padilla’s clients but were instead diverted by Padilla into bank accounts under his ownership and control. The money was used for home improvements, the purchase of luxury autos, and for wire transfers to Padilla’s family members, Assistant U.S. Attorney James C. Hughes told the court.

In order to deceive his clients, Padilla would typically prepare two different sets of income tax returns for the same year; an initial return to provide to the client and a second return to file with the IRS.

In the IRS copies, Padilla would claim false and inflated itemized deductions for items such as mortgage interest. These false itemized deductions had the impact of decreasing the reported tax liability of the named client, and thus increasing any claimed tax refund.

The listed clients were unaware that these false deductions had been claimed on their returns, as their client copies did not include the fraudulent deductions, according to the IRS.

Kronstadt said Padilla “caused substantial losses,” adding that a prison sentence was warranted because “protecting the public from further crimes is important.”

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